PUSHING DIGITAL
Royal Bank pushes online
TORONTO The Royal Bank of Canada has connected with 3.2 million Canadians via its digital app-building efforts, and the lender will soon begin trying to more aggressively convert those users into regular banking clients, the company’s chief executive said Wednesday.
RBC announced the launch of its RBC Ventures Inc. subsidiary in June 2018. At the time, the bank set out to acquire five million users of the various products and services within five years, as well as to convert 10 per cent of those people, or 500,000, to customers of the bank itself.
During a conference call on Wednesday, RBC CEO Dave McKay said they have now made 3.2 million “connections” with Canadians across their ventures, including both those the bank has built and bought.
The focus has been on establishing those ties, which RBC would have previously had to buy in a social media or digital channel, McKay told analysts during the call.
Now, though, RBC is poised to ratchet up its conversion efforts through the 17 ventures it has rolled out to date, such as the Ampli loyalty program, the business-expense tracking app Sorted and the “personal moving concierge” MoveSnap. Another 14 ventures are under development, the CEO said.
“We have a connection to a new Canadian potential client that we never had before, and they’ve come through those 17 ventures,” McKay said.
“So we’ve really made that the primary focus and we actually haven’t tried to convert them to RBC product-holders as yet. We’re trying to build deeper relationships, trying to get to know them, and that’s going to pay off over the long term. Having said that, 2020 is a big scaling year, where we are going to start the conversion process through a number of these ventures.”
RBC’s venture strategy is partly aimed at technology companies that are sliding into the financial-services sector, squeezing the bank’s business. McKay told analysts that he thought they already made more than 50,000 conversions “just in pilot phase, without any real marketing spend behind it.”
Rod Bolger, RBC’s chief financial officer, said that they have continued to increase their investment in the ventures project. Although he declined to put any numbers on that investment, he said it is “not an amount that has had a significant impact” on the bank’s expenses.
Ventures also fits into a broader plan by Toronto-based RBC to add more than 2.5 million new Canadian banking customers by 2023.
McKay said the bank, Canada’s biggest, had added approximately 300,000 net new Canadian banking clients this year, in addition to 300,000 picked up in 2018.
“The primary objective initially for those ventures is, again, to bring new clients to RBC and to improve the quality of life of clients by enabling them to achieve their aspirations in a different way than traditional banking would enable them to do so,” Bolger told the Financial Post in an interview.
In addition to the ventures update, RBC reported Wednesday a profit of $3.2 billion for the three months ended Oct. 31, a one-per-cent dip from a year earlier due to weaker results from the bank’s investor and treasury services, capital markets, insurance and corporate support divisions.
Adjusted earnings per share were $2.22 for the fourth quarter, down one per cent year-over-year and below the $2.28 analysts had been expecting.
“There’s no sugar coating that this was a challenging end to 2019 for RBC, with misses across most divisions,” wrote Eight Capital analyst Steve Theriault.
The latest earnings were weighed down by $113 million in pre-tax expenses tied to severance and related costs that were “associated with repositioning” of the bank’s investor and treasury services unit, which performs a variety of duties for institutional clients such as pensions, sovereign wealth funds and other banks. Royal Bank shares fell 2.1 per cent to close at $104.95.
It has been a “challenging environment” for the business, McKay said, and the bank took steps during the quarter to make changes, including deciding to cut jobs in Europe and to slim down its presence in Australia.
RBC also recorded a $142-million pre-tax gain on the sale in the quarter of the private debt business of London-based asset manager BlueBay, which RBC struck a $1.56-billion deal to buy in 2010.
“Almost similar to last quarter, Canadian Banking and Wealth Management delivered strong earnings, while market-sensitive businesses were soft (e.g. Capital Markets, Insurance, and Investor & Treasury Services),” wrote Canaccord Genuity analyst Scott Chan of RBC’s quarter. “The firm was impacted by higher credit provisions, but also benefited from a lower tax rate.”
For its fiscal 2019, which ended Oct. 31, RBC reported record net income of nearly $12.9 billion, up four per cent from 2018.
RBC also announced Wednesday that National Football League chief operating officer and former BCE Inc. executive Maryann Turcke will in January join the bank’s board of directors.